The notion of ‘Generation Rent’ seemed to be further enforced recently with the publication of a report by IMLA which predicts that come 2032 less than half of UK households (49.2% in fact) will be homeowners. It suggests that in less than two decades time home ownership will be the ‘preserve of the old’ and the majority of people will be renting either through private or social arrangements – this would be the first time since the early 1970s that the number of renters would outstrip homeownership.
Of course at this moment in time we are not in this position and IMLA suggests that a renewed political and economic focus on building new homes will help stave off such a prediction. However, while I agree that the number of people renting is likely to stay stable I’m unconvinced whether this nation’s love affair with home ownership is going to turn sour anytime soon. To me it seems ingrained in our national psyche and, let’s be honest, UK plc relies so much on the housing market that there is a lot riding on property purchasing staying strong.
I do however believe that the powers that be can appear to follow a somewhat contradictory approach to home-ownership in this country. Most political parties agree that home-ownership should remain a tangible aspiration for people however the recent record on new-builds is staggeringly poor. On the one hand we have Government schemes such as Help to Buy designed at helping first-time buyers with small deposits onto the housing ladder, but months later introduce the MMR rule changes which make it much more difficult for those very same people to secure a mortgage.
That said, it’s my firm opinion that the ambition to own property still remains at heart of UK society and this does not appear to be going away anytime soon. The big question, raised by the IMLA report, is who is going to be purchasing the property? I suspect that fears the older generation will hoover up all the available homes at the expense of first-time buyers is an over done argument. Although it’s clear that, for example, the new rules around pensions might mean more pensioners seek an investment property home for their pension cash.
And I do not doubt for one second that the buy-to-let market is playing an increasingly strong part in the UK housing market helped by the fact that loans exist outside regulation and there are tax incentives for landlords. A quick glance at the recent CML regulated mortgage survey buy-to-let statistics reveals such a strengthening sector. The figures for March this year show an increase in lending by both volume and value on February – but it is perhaps the yearly comparison which shows best the sector improvement. 16,200 buy-to-let loans were advanced in March this year, up 56% on the same month in 2013, while the value of the loans was £2.2bn, up 69% on the same period a year earlier.
Therefore I very much doubt that property purchasing will go out of fashion and, to my mind, there will be continued support for the UK to remain a home-owning democracy. The good news is that through schemes such as Help to Buy 1 we are starting to address the housing supply shortage and it is these new-builds which are targeted at the next set of first-time buyers. In other words, members of so-called ‘Generation Rent’ should have access to properties. As long as this momentum can be maintained then the country (and the Government) should be able to maintain a fair balance and where individuals have the ambition to own a property they should still be able to do so.
Richard Adams is managing director of Stonebridge Group